There’s yet another new tax law in Brazil this year. Law No. 14.754/2023, which went into effect on January 1, is known as the The Tax on the Super-Rich.

Over the past few years, it’s become a trend among wealthy Brazilians to hold financial investments offshore through companies based in tax havens. That’s because the law required payment of taxes over an entity’s earnings only when the funds were sent to Brazil. This meant that investors were able to freely accumulate the capital derived from bonds and securities, for example.

But that’s all changed. Now, the profits of foreign companies controlled by residents of Brazil are taxed each year on December 31. The basis for calculating the income tax is determined by applying a flat rate of 15%.

So keeping money out of Brazil doesn’t make a difference anymore from a tax perspective. In addition, taxpayers must report foreign income on their annual tax return declarations separately from the income and capital gains generated in Brazil.

This is just one more way the federal government has found to increase its tax revenue and reduce tax evasion, particularly with respect to assets outside Brazil. According to the Office of the President, the measure puts an end to the practice of indefinitely postponing payment of income tax over interest and other income.

With all the new tax reform in Brazil this year, one has to wonder what’s next. The government is clearly looking for new ways to get its share.